Private sector credit growth in Bangladesh — a key measure of economic activity and investor confidence — has fallen to its weakest level in more than ten years.

Data from the Bangladesh Bureau of Statistics shows that private investment accounted for just 22.48% of GDP in FY2024–25, the lowest in five years and well below the 28.2% target set in the country’s 8th Five-Year Plan.

A tight monetary policy aimed at tackling persistent double-digit inflation has made borrowing significantly more expensive. Current business loan interest rates are in the 16–17% range.

Compounding the problem, industries are facing irregular gas supplies and frequent energy disruptions, which have hampered production. Business leaders have also pointed to regulatory inefficiencies and corruption as persistent obstacles to growth.

GDP growth slowed to 3.97% in FY2025, while the unemployment rate rose to 4.63% in the October–December quarter of 2024, signaling mounting economic strain.

“Investment activity has virtually come to a standstill,” said AK Azad, chairman of Ha-Meem Group, one of the country’s largest garment exporters. He added that many entrepreneurs are reluctant to invest until political stability and consistent policies are restored.

Anwar-Ul-Alam Chowdhury, president of the Bangladesh Chamber of Industries, warned that the slowdown is not a temporary dip but a sign of deeper trouble. “The data reflects a more severe erosion of business confidence,” he said, stressing that political uncertainty is undermining faith in state institutions and raising doubts over the government’s ability to maintain stability.

Asif Ibrahim, former president of the Dhaka Chamber of Commerce and Industry (DCCI), noted that nearly 2 million young Bangladeshis enter the labor market each year. Without private investment, sustaining growth and creating jobs will be difficult.

DCCI president Taskeen Ahmed said rising inflation, currency depreciation, and reduced demand for credit have intensified investor hesitation. He also pointed to geopolitical tensions, political unrest, high borrowing costs, and prolonged energy shortages as factors weighing on confidence.

Policy Exchange Bangladesh chairman M. Masrur Reaz observed that private investment has been stuck near 23% of GDP for years, far below the level needed for robust, long-term growth. He cited inflation, foreign exchange pressure, weak demand, poor infrastructure, red tape, and unclear policies as key challenges.

Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), said a combination of high energy prices, interest rates, import restrictions, corruption, and bureaucratic hurdles has deterred new investment. Without renewed capital inflows, she warned, industrial growth, job creation, and incomes will stagnate.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said the lack of consensus on reforms has worsened risks for investors, making long-term business planning increasingly difficult.

Business leaders and economists agree that without swift reforms — including political stability, reliable energy supplies, improved governance, and a better investment climate — Bangladesh risks prolonged economic stagnation.